By Jose Eli da Veiga – The global financial system has spent more than 20 years playing coy in the face of the pressing challenge of sustainable development. Recently, however, it has begun to show signs of a historic change in attitude, although such signs are still more rhetorical than practical.

Twenty-four years ago, a body was set up in Geneva with the mission of “bringing about systemic change in finance to support a sustainable world”. It was the result of a successful initiative by UNEP (United Nations Environment Programme) to persuade organisations in the financial system to adopt some basic principles of conduct. Initially, these were very specific to the activities of banks and insurance companies, but they were soon consolidated into a single “statement”, now adopted by more than two hundred entities spread across forty countries (“UNEP Finance Initiative”: http://www.unepfi.org/).

It took too long for another initiative of comparable magnitude to emerge. It was only in April 2012 that the finance ministers and central bank governors of the G20 created a group to study the main dimension of sustainability today: decarbonization. And it was this “Climate Finance Study Group” that motivated, exactly one year later, the US State Department to gather in Washington a select club of governments and experts, at which point some key players in international finance began to look differently at private support for “green projects.”

Issuance of 'green bonds' is still insignificant compared to the needs to meet the goals of the 2030 Agenda

It took another two years until a double movement with immense global impact boosted this trend: the Paris Agreement, which at least unlocked the climate negotiation process, was added to the “2030 Agenda Transforming Our World”, which had already established the seventeen Sustainable Development Goals (SDGs).

However, it was only in the last few days that suspicions were confirmed that perhaps the belated adoption of the global finance sector by the culture of sustainability was indeed for real. First in Hangzhou, during the 11th G20 Summit, where the Chinese presidency did everything it could to release the report of the recently created “G20 Green Finance Study Group”, conducted in partnership with Great Britain, and which has the decisive collaboration of UNEP itself in its general secretariat.

Soon after, at last week’s marathon of global events in New York, during which a report presented by the President of the 71st session of the UN General Assembly, Peter Thomson, and Permanent Representative of the Republic of Fiji, “Moving from momentum to transformation in a time of turmoil”, was widely publicized.

These two reports convey the same message: it is urgent that the financial system take the path of sustainable development. The problem is that, despite the advances in such rhetoric, there is still very little concrete evidence that the system is ready to break away from such profound alienation.

The most frequently cited figure is always the evolution of annual green bond issuances. In billions of dollars, they made an initial leap between 2009 and 2010, going from less than one to almost four. The second leap took them from three to eleven between 2012 and 2013. In 2014, they exceeded 36, in 2015, 42, and in the first nine months of this year, they reached more than 51. Overall, there is now a green bond market worth US$150 billion.

This may seem like a lot, but it is insignificant when compared to the financing needs estimated by UNCTAD to meet the targets set out in the 2030 Agenda. Even excluding developed countries, meeting the SDGs will still require annual investments in the range of US$3.3 trillion to US$4.5 trillion. In other words, around US$2.5 trillion more than what has been invested. Worse still, for now only 1% of the total bonds traded, 1% of the total assets of institutional investors, and a maximum of 10% of the total bank loans can be considered green.

Hence the need to examine more closely this very recent outbreak of “green bonds”. If until 2012 their only issuers were multilateral development banks, from then on the participation of commercial banks, municipalities, companies and credit and export agencies began to grow significantly. As a result, the accumulated value of green bonds issued by the private sector is about to reach that of multilateral banks.

It is also important to highlight that the use of these resources continues to be highly concentrated in the energy sector (44%), although it continues to increase in the others, particularly in the transport and construction sectors, due to the expansion of the markets for these securities in China and India, where they already have strong government support.

This is all that needs to be taken into account to understand the crucial importance of public consultation on the welcome “Guide to issuing green bonds in Brazil”, opened ten days ago in partnership with Febraban with the CEBDS, with technical support from GVces and Sitawi Finanças do Bem.

(*) Text published in the newspaper Valor Econômico on September 29, 2016.